Sponsored : Have you thought about your insurance lately? Advise by Jill Henning – Part 2

(Part 1)

Hello, everyone!  I hope you are all enjoying the last remnants of summer as fall approaches.  I’d like to start a three part series that reviews the most important factors of your insurance rotection…protecting your assets and protecting your paycheck.

Many people think of insurance as a “necessary evil” or just another bill; however, insurance actually protects your assets and lifestyle.  The first step to ensure your assets are protected comes from your liability insurance.  I often find liability insurance to be one of the most frequently under-insured levels of coverage when I meet with clients.

On your auto insurance, there are two components of your liability coverage…bodily injury and property damage.  When you look at a declarations page or your insurance card, the liability coverage is often listed something like:

100/300/100

Or

250/500/100

The numbers are representative of thousands, so the numbers mentioned above really mean $100,000/$300,000/$100,000 or $250,000/$500,000/$100,000

To explain further, those number correspond to :

Bodily Injury for one person/Bodily Injury if more than one person/Property Damage

As an example, if your limits are 100/300/100 and you are at fault for a car accident, your policy will pay a maximum of $100,000 if there was one person in the other vehicle that was injured.  If there was more than one person in the car injured, then the policy will pay a maximum of $300,000.  In addition to hospital bills, that person(s) lost wages while not able to work would also be paid.  

If the person(s)’ injuries exceed the policy limit, any additional medical expenses, lost wages, etc. are technically subject to you out of pocket.  So, if there is a claim where 5 people are injured, you could be looking at a very large claim.  This is where your assets are put at risk.  Without having insurance coverage to pay the claim, the injured party may obtain legal representation to file a suit against your retirement account, liquid checking/savings account, equity in your home or vehicles…really any asset you have.  In the event that the claim exceeds what your assets would be able to provide, in the state of Minnesota, they can file a suit to have your future wages garnished.   

The best way to ensure you are fully protected is to build a “wall” of liability equal to your assets so that if the worst happens and there is a large claim, it will be the insurance carrier’s coverage from your insurance that pays out instead of your assets or future wages.   Typically $500,000 is the highest liability limit I write on my client’s auto, home, boat, etc. and then if the client needs additional liability coverage to protect their assets, I recommend or write a Personal Liability Umbrella.  

A Personal Liability Umbrella is a very inexpensive way to provide additional liability protection.  It is a separate policy that extends coverage to any underlying policy (auto, home, boat, recreational vehicle, etc.) once the base policy limits are exhausted.  For example, if you have a boat, and the liability limit on the boat is $500,000 but you have a $700,000 claim, the boat policy would pay out $500,000 and then the additional $200,000 to fulfill the claim would be paid out by the umbrella.  

Liability umbrellas are sold in increments of $1M and typically cost between $100-$200 a year, depending on your household’s situation.  

The more policies you have and the more drivers in your household, the larger your exposure to a large claim situation, and hence more of a reason why a personal liability umbrella would be necessary for your family.   If you happen to have inexperienced teenage drivers in your household, a liability umbrella would be an especially crucial coverage.

My hope is that this article has provided you with some additional insight on liability and will give you the information needed to check your own liability coverage to compare them to what they should be based on your assets and net worth.  Liability insurance is one of the most inexpensive types of coverage out there…it is worth your time and a slight premium increase to ensure you are protected!

As always, I am happy to answer any individual situations or questions you may have.  I can be reached by phone at my office at 952-895-9596 or by email at jill@jillhening.net.  

I look forward to connecting with you all next month on the 2nd part of the series on protecting your assets and protecting your paycheck.